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When to call a tax professional

You know you have to pay taxes. So you may not be keen on spending even more money to work with a tax professional.

But since taxes affect most areas of your life – and tax laws change all the time – there are several situations where it makes financial sense to consult a tax professional, who can not only help you prepare your tax return, but also offer you sound advice on tax planning. .

If your financial life is simple, chances are you can manage your own tax return. That is, unless you’re too busy or just don’t like filling out tax forms accurately and on time.

Your tax situation is generally considered “simple” if you don’t have much extra income outside of your regular job. For example, your income consists of your paycheck and some interest on your bank accounts. And maybe you rent out your house and don’t have kids.

In such a case, do-it-yourself tax software that offers access to a live helpline can walk you through the process step-by-step, said Misty Erickson, tax content specialist at the National Association of Tax. Professionals.

But the more complex your financial life, the more important it becomes to seek professional help. This is because tax rules, tax rates, tax breaks and the tax forms will be different depending on the type of income and investments you have.

An example: Your household income is a mix of wages, investment income, self-employment income, and a government benefit, such as Social Security or unemployment.

On top of that, you might want to take a host of different deductions and credits. For example, a small business owner who doesn’t make a lot of money and is a parent of young children might be in line to take many such breaks, but each has their own (often confusing) eligibility rules.

Think of it this way, Erickson said, “The more tax documents [and forms] you have [to file]the more complex your taxes.

If you have received a notice (or worse, multiple notices) from the IRS that you owe money, including penalties and interest, or that you are being audited for a under-reporting of income, find someone qualified and experienced in representing taxpayers before the IRS. – whether it is a chartered accountant, a registered agent or a tax lawyer.

Finding someone with experience is key, said John Schultz, a California-based certified public accountant. “They know the bigger issues that need to be addressed and what can be brushed aside.”

Plus, they can advise you on what to say and what do not to say, noted Erickson, who used to audit Minnesota taxpayers. “If you have someone in your area who knows taxes, they can help you and it can go a lot faster.”

Making big personal and professional changes will have tax consequences.

So if you’re getting married, have a child, divorced, or plan to retire in five years, consult a tax professional and get advice on how to minimize your tax bite or maximize your tax advantage.

The same is true if you are starting, selling, or buying a business. Or even if you’re just hoping to kick off a revenue-generating side gig as an owner.

And if you’re selling your home, you could benefit from help determining your capital gains liability on the sale.

Tax monitoring of cryptocurrency transactions is growing. And record keeping can be a complex tangle when it comes to transactions and payments.

If you sell crypto or get paid for your crypto goods or services, these are taxable events. You may also need to issue tax forms if you are paying someone else in crypto for their goods and services.

It’s easy to forget about taxes when you’re caught up in the excitement of a new frontier, especially for inexperienced investors. “They don’t realize there’s a lot of tax liability that’s going on with these things,” Schultz said.

Running a small business – or even making a living as an independent contractor – has all sorts of tax implications.

Before you start, consult with at least one tax professional to learn more about these implications, including the many tax breaks you can get based on your expected business expenses.

You will also need help determining how to structure your business for tax purposes. There are several options that will affect the amount of tax you will have to pay and the amount of liability protection you will have. There may also be different rules on how to account for your expenses and tax liabilities if you have employees or hire partners.

“Doing it upfront can save you a lot of money,” Erickson said.

Schultz said people often tell him they received an inheritance and wonder if it’s taxable. His response: “Well, what did you inherit? A retirement account? Goods? Store? Cash ? »

Just like with different types of income, there are different types of inheritance, and each has its own tax implications.

Likewise, if you are someone’s executor, you could save yourself (and the person’s heirs) a lot of headaches if you enlist the help of a tax attorney to prepare the tax return. estate income and to learn more about federal and state taxes. consequences of the assets to be inherited.

As helpful as a tax professional can be, you absolutely need to make sure you’re working with a reputable and knowledgeable person, because if you don’t, you could be held liable for unpaid taxes, penalties, and interest.

The US Department of Justice recently urged consumers to learn how to spot a dishonest tax preparer. “Taxpayers are responsible for what’s on their return, even when it’s prepared by someone else,” said Assistant Deputy Attorney General David A. Hubbert of the Justice Department’s Taxation Division. . “If your preparer asks you to sign a blank return, does not let you review your return before filing it, or files your refund in a way that is not clear to you, check the IRS website for you make sure you don’t expose yourself to trouble.”

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